Nigeria’s Securities and Exchange Commission (SEC) has issued a 30-day ultimatum for crypto exchanges and digital asset traders to re-register their businesses, warning of enforcement actions against non-compliance.
In a statement released on June 21, the SEC announced the initiation of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs). The program is part of the Commission’s efforts to amend existing rules on digital assets issuance, offering platforms, exchanges, and custody to better align with current industry trends.
The regulator stated:
“All operating and prospective VASPs are hereby directed to visit the SEC ePortal to complete the application process no later than 30 days from the date of this circular.”
Nigeria has seen significant growth in crypto adoption, ranking second on Chainalysis’ Global Crypto Adoption Index in 2023, up from ranking 11 in the previous year. The rising adoption occurred despite a two-year-long ban by the Central Bank of Nigeria (CBN) on banks facilitating crypto transactions.
The SEC’s directive comes amid increasing scrutiny and skepticism toward digital assets. In June 2023, the SEC warned against a fraudulent entity misusing the name of crypto exchange Binance, emphasizing the high risks associated with digital assets, which could lead to total investment losses.
Fiat currency devaluation
Earlier this year, Nigerian authorities accused exchanges like Binance of facilitating money laundering and influencing the foreign exchange market after the local populace began to favor digital currencies over the naira.
The rising adoption further exacerbated the fiat currency’s devaluation amid the country’s economic woes causing the government to crackdown on exchanges facilitating the trades via peer-to-peer markets.
The Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) charged Binance executives with tax evasion and money laundering — detaining them for weeks before the charges were dropped.
Despite these challenges, Nigeria’s crypto market remains vibrant and the IMF has recommended the country adopt a comprehensive regulatory regime for the industry to solve some of its economic problems. The SEC is also exploring tokenization, with plans to pilot a permissioned liquidity pool comprising tokenized bonds and deposits.
The Commission’s push for stricter regulations reflects a broader effort to ensure the integrity and stability of the financial system amid the rapid evolution of digital assets.
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